Filed by Duke Energy Corporation
Commission File No. 1-4928
Pursuant to Rule 425 under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Deer Holding Corp.
Commission File No. 132-02302
Cinergy Merger: Q&A for Duke Energy Employees
Q. Why does this transaction make sense?
A. The combination of Duke and Cinergy creates a stronger platform for
our regulated and unregulated businesses by increasing the scale and
scope of both. Our increased size will position us well to take advantage
of further consolidation opportunities in both the utility and merchant
energy business. The combined merchant power businesses gain fuel and
geographic diversity. And, after this combination, Duke Energy's electric
and gas businesses would both be large enough to stand alone -- giving us
the flexibility to separate them in the future if we determine such a
move would create more value.
The transaction will add value to Duke Energy with higher earnings after
the first full year of operation. The benefits will increase further in
future years thanks to savings achieved through cost efficiencies,
estimated to reach $400 million a year (before costs to achieve) by the
third year. Over time, savings from the regulated businesses will be
shared with customers.
Q. What are the specific terms of the transaction?
A. The merger will be accomplished by Duke acquiring all of the shares of
Cinergy in exchange for shares of Duke. Cinergy shareholders will receive
1.56 shares of Duke stock for every share of Cinergy stock. That amounts
to a 13.4 percent premium based on the companies' closing stock prices as
of May 6, 2005. The Duke board intends to raise the dividend at its June
meeting to an annual rate of $1.24 -- a 12.7 percent increase --
beginning with the September payment to Duke shareholders this year.
Q. How will the company be organized?
A. The company, to be called Duke Energy Corporation, will be a Public
Utility Holding Company headquartered in Charlotte. Upon closing of the
merger, Paul Anderson will be chairman and Jim Rogers will be president
and CEO. All of the business units, except Duke Energy Gas Transmission
and Duke Energy Field Services, will report directly to Rogers. Fred
Fowler will become president and CEO of those two gas operations with
dual reporting roles -- to Anderson for strategy and to Rogers for
operations.
The Public Utility Holding Company Act (PUHCA) prohibits ownership of
certain non-energy related businesses, so if that act is not repealed, we
would likely be required to divest Crescent Resources, our affiliated
real estate business. If that occurs, we expect the divestiture to be
accomplished in an orderly process over three to five years to allow us
to achieve maximum value. Given the possibility that PUHCA could be
changed or repealed during that period, we have no firm conclusion about
the disposition of Crescent.
Even under current PUHCA requirements, we expect to be able to retain all
of the other non-utility businesses, including our international
operations.
Q. What are the implications of this merger on employees? On employee
benefits?
A. The earliest closing date we expect will be in the summer of 2006. As
a result, for the next year, it will be business as usual at Duke Energy.
In the meantime, it is important for employees to continue to focus on
achieving their own work group and personal objectives. While some
workforce reductions are anticipated in the long term as the two
companies join forces, new career opportunities will also be created.
During the transition period, the specific numbers and locations of
workforce reductions will be determined. The total reduction is expected
to be about 1,500, or 5 percent, to be spread over corporate shared
services, utility back office and non-regulated merchant operations.
In the near term we don't anticipate changes to the benefits plans at
either predecessor company. As we go through the transition and
integration process, we will determine how the benefits of the two
companies will come together.
Q. What are the implications of this merger on electric customers?
A. Duke's and Cinergy's electric utilities are known for their commitment
to superior customer service. They have excellent reliability records and
electric rates below the national average. Over the long term, customers
are expected to benefit from the efficiencies of a stronger, combined
company and the sharing of best practices.
Q. Where will the businesses be located?
A. Following the merger, the combined company will be a registered
holding company with corporate headquarters in Charlotte. Local
headquarters of the operating utilities will remain unchanged by the
merger: Cincinnati Gas & Electric Company and Union Light, Heat & Power
will remain in Cincinnati; PSI Energy will remain in Plainfield, Indiana;
and Duke Power will continue to be headquartered in Charlotte. DEGT and
certain commercial operations will remain in Houston. DEFS will remain
headquartered in Denver and Crescent Resources will continue to be
located in Charlotte.
Q. How does this deal improve DENA?
A. The combined merchant operations of the two companies will be better
positioned to pursue deregulated opportunities in the coming years. One
of Duke's major objectives this year was to pursue a combination of
DENA's assets with another merchant player. The transaction accomplishes
this. The combined companies will immediately have more scale and fuel
diversity, two of the important characteristics we sought to provide a
more stable platform at DENA. Specifically, Duke's gas position in the
Midwest complements Cinergy's coal position in that region. The
combination will produce cost savings of about $95 million in the
merchant business in the first year after the deal closes.
Q. How do the values and cultures of the two companies compare?
A. The values of the two companies are very similar. Both put strong
focus on safety, customer service, environmental sustainability,
diversity and inclusion and employee development. Both companies are
committed to strong corporate stewardship in the communities where they
do business. The companies have a history of good working relationships
through their merchant energy businesses. Cinergy currently operates
Duke's Vermillion Energy Facility in Indiana.
Q. What approvals are required? When do we expect the transaction to
close?
A. The transaction must be approved by the shareholders of both
companies, as well as the Federal Energy Regulatory Commission, the
Securities and Exchange Commission, the Nuclear Regulatory Commission,
the Department of Justice and state utility commissions in Ohio, North
Carolina, South Carolina, Indiana and Kentucky. We expect the transaction
to close in about 12 months.
Q. What happens next?
A. We will be working to obtain regulatory approvals while an internal
integration team begins designing the combined structure of the
companies. At this point, it's not advisable to contact employees at the
other company unless you are part of the integration team. We will keep
you updated on developments as they occur.
(C) Duke Energy Corporation
Cathy Roche, csroche@duke-energy.com, May 9, 2005
* * *
Forward-Looking Statements
This document includes statements that do not directly or exclusively
relate to historical facts. Such statements are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward-looking statements
include statements regarding benefits of the proposed mergers and
Restructuring Transactions, integration plans and expected synergies,
anticipated future financial operating performance and results, including
estimates of growth. These statements are based on the current expectations of
management of Duke and Cinergy. There are a number of risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements included in this document. For example, (1) the companies may be
unable to obtain shareholder approvals required for the transaction; (2) the
companies may be unable to obtain regulatory approvals required for the
transaction, or required regulatory approvals may delay the transaction or
result in the imposition of conditions that could have a material adverse
effect on the combined company or cause the companies to abandon the
transaction; (3) conditions to the closing of the mergers and the
restructuring transactions may not be satisfied; (4) problems may arise in
successfully integrating the businesses of the companies, which may result in
the combined company not operating as effectively and efficiently as expected;
(5) the combined company may be unable to achieve cost-cutting synergies or it
may take longer than expected to achieve those synergies; (6) the transaction
may involve unexpected costs or unexpected liabilities, or the effects of
purchase accounting may be different from the companies' expectations; (7) the
credit ratings of the combined company or its subsidiaries may be different
from what the companies expect; (8) the businesses of the companies may suffer
as a result of uncertainty surrounding the transaction; (9) the industry may
be subject to future regulatory or legislative actions that could adversely
affect the companies; and (10) the companies may be adversely affected by
other economic, business, and/or competitive factors. Additional factors that
may affect the future results of Duke and Cinergy are set forth in their
respective filings with the Securities and Exchange Commission ("SEC"), which
are available at www.duke-energy.com/investors and www.cinergy.com/investors,
respectively. Duke and Cinergy undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transaction, a registration statement
of Deer Holding Corp., which will include a joint proxy statement of Duke and
Cinergy, and other materials will be filed with the SEC. WE URGE INVESTORS TO
READ THE REGISTRATION STATEMENT AND PROXY STATEMENT AND THESE OTHER MATERIALS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT DUKE, CINERGY, DEER HOLDING CORP., AND THE PROPOSED
TRANSACTION. Investors will be able to obtain free copies of the registration
statement and proxy statement (when available) as well as other filed
documents containing information about Duke and Cinergy at http://www.sec.gov,
the SEC's website. Free copies of Duke's SEC filings are also available on
Duke's website at www.duke-energy.com/investors, and free copies of Cinergy's
SEC filings are also available on Cinergy's website at
www.cinergy.com/investors.
Participants in the Solicitation
Duke, Cinergy and their respective executive officers and directors may be
deemed, under SEC rules, to be participants in the solicitation of proxies
from Duke's or Cinergy's stockholders with respect to the proposed
transaction. Information regarding the officers and directors of Duke is
included in its definitive proxy statement for its 2005 Annual Meeting filed
with the SEC on March 31, 2005. Information regarding the officers and
directors of Cinergy is included in its definitive proxy statement for its
2005 Annual Meeting filed with the SEC on March 28, 2005. More detailed
information regarding the identity of potential participants, and their direct
or indirect interests, by securities, holdings or otherwise, will be set forth
in the registration statement and proxy statement and other materials to be
filed with the SEC in connection with the proposed transaction.